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Skandia pushes for FCA to remove sunset clause on platform rebates

Skandia wants the FCA to revise rules which mandate the unbundling of platform fees on legacy business after April 2016.

The FCA has banned all legacy payments between fund managers and platforms by April 2016, with a two-year sunset clause from this April to allow firms to change their business models. Cash rebates and fund manager payments to platforms are banned on new business.

In an update to its policy handbook this week the FCA reveals one platform, which Money Marketing later identified as Skandia, argued cash rebates and rebates paid to platforms should be treated the same. The regulator says this “would have involved removing the April 2016 end date for ‘undisturbed’ legacy retained rebate business.”

Old Mutual Wealth vice chairman Peter Mann says there is an unlevel playing field between rebates to platforms and cash rebates, which are allowed to continue indefinitely for legacy business.

Mann says: “We think there is an inconsistency between the treatments of legacy cash and retained rebates. However, our new business pricing model has been designed to take account for the expiration of retained rebates and is compliant for April 2014 and 2016. Two-thirds of assets on our platform are now in our unbundled charging structure.” 

The Lang Cat senior consultant Sam Lynn says: “The FCA’s position on moving to explicit platform charges is very clear. We think that ship has sailed.” 

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. At a time when RDR has been branded as a disaster by a “Think Tank”, its time for some contrition on the part of the regulators.

    “We think that ship has sailed” is no excuse. This ship may have sailed but its sprung several leaks and its time to head back to harbour for a refit!

  2. There simply shouldn’t be any form of rebates to anyone – end. It confuses the investor, is the exact opposite of the FCC’s demands for transparency and openness and now different charging levels for different platforms (eg Invesco) may be considered not to be ‘treating customers fairly’ either…. my, it won’t be long before they’ll be offering independent ‘advice’ and wholesale options to investors ‘as long as charges at ‘x”. It sounds like platforms only adding options as long as they received backhanders like before…..Now would that make them restricted i wonder, too!

  3. The problem is manifest. Platforms – all platforms are struggling to maintain profitability in the face of the new rules and the amazing new charging structure from Alliance Trust. If they can sustain this model without going bust – the other platforms will (go bust). Or there will be a huge change – whether that will be for the better is a moot point.

  4. Before knocking rebates, it’s worth remembering how the platform industry started in the UK – a group of large fund managers reacted to Fidelity’s earlier move into wider distribution, by creating Cofunds. That aggregation service was intended to save those fund groups’ operational costs via the sharing of a single nominee. Platforms would take over writing to customers on corporate actions, valuations etc. Hence rebates – payments by fund groups to the platform in return for that service. Customers paid a fixed (eg £68 at Selestia) and relatively insignificant fee. Advisers got a new and more efficient way of dealing. Everybody should have been happy. However now (ex Alliance Trust) customers pay £000s for a platform they never asked for. At least one platform is even dictating which funds legacy unit rebates should be invested into – rather unTCF. Fund managers will have to PAY platforms for operational support and MI, while their margins have already contracted. The only part of the chain that is better off, is the adviser, where a 100bp annual fee is not uncommon, versus the formerly ubiquitous 50bp trail. Worth every penny I’m sure, but it strikes me the fund groups, for good or Ill, have suffered most. No wonder they favour guided architecture – I suspect you’ll see third party sales teams culled and a refocus on the adviser by fund group reps. Now at least that would be a positive development…

  5. This shows how much of a threat this is to their business model. Unsurprising really that the oldest platform is most upset, they have the most to loose.

  6. It’s worth remembering that the platform industry started in the UK with an unbundled wrap Platform, Transact, some months before the fund supermarkets from Fidelity and Cofunds. The launch of these had the effect of reducing the rebate from 100 bps which was then being paid to the 75 bps level negotiated by the fund supermarkets – a real backwards step.

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